36% Of Americans Aren't Checking One Basic Financial Box

Over 1,000 U.S. adults
shared their savings habits in a recent national
poll.Sean Gallup / Getty
Images

An alarming number of Americans aren't preparing for the day when
they'll need to live off their savings.

More than a third of adults say they have not started saving for
retirement yet, according to a national poll accompanying
Bankrate's monthly Financial Security Index.

Even Americans who are getting close to retirement age seem to be
struggling when it comes to planning their financial future. The
survey shows that more than a quarter of the respondents age 50
to 64 have yet to start saving for retirement.

"What concerns me most is the high percentage of people that
haven't started saving for retirement," says Greg McBride, CFA,
Bankrate's chief financial analyst. "Many of those that are
saving aren't saving all that much."

Why so many live on the edge

It's hard to prioritize retirement savings when you live paycheck
to paycheck, and that's unfortunately the biggest obstacle for a
large part of the population, says Brian Plain, a CFP in Oak
Park, Illinois.

"I think a lot of people want to save, but they keep waiting for
the right time," he says. "They'll say things like, 'When I get
my next raise I'll start saving.'"

Procrastination certainly contributes to the problem. But another
issue is many people don't have access to a workplace retirement
savings plan, McBride says.

If your employer doesn't offer a savings plan such as a 401(k),
don't let that keep you from saving. Consider an individual
retirement account, or IRA, as an option, he adds.

Another reason many people don't save for retirement is sometimes
they are in denial about what their financial needs will be as
they age.

"I have had people tell me that they love their job and intend to
work until they drop, thus there is no need for them to save,"
says Gail Cunningham, spokeswoman for the National Foundation for
Credit Counseling. "However, these people are not considering the
potential of a job loss or medical issue that prevents them from
working."

The silver lining

While some people aren't even close to being ready for
retirement, others say they have been saving since a young age,
Bankrate's survey shows.

About 10% of the respondents in the survey say they started
saving for retirement in their teens.

That's a "pleasant surprise," Cunningham says. About 23% say they
started saving in their 20s and 14% in their 30s.

The study was conducted by Princeton Survey Research Associates
International and included answers from 1,003 adults in the
U.S.

Bankrate's retirement savings calculator can help
quantify the effects of saving from an early
age.Bankrate.com

When to start saving

The earlier you start saving, the easier it will be to build your
nest egg.

"The younger you are, the more of an ally time becomes," McBride
says. "The power of compounding is most evident over long periods
of time, and having a longer period of time for your retirement
savings to grow and compound makes today's contributions much
more impactful.”

For example, if you start putting aside as little as $100 per
month in an IRA savings account when you are 20 years old, you'll
have nearly $367,000 by the time you reach 65, according to
Bankrate's IRA savings calculator. (The calculation
assumes a 7% annual return pre-retirement and 4% in retirement.)

That translates to a little more than $1,700 per month before
inflation. If you consider 3% annual inflation, you would receive
the equivalent of $459 per month in income. That's clearly not
enough to retire, but it's better than nothing.

Now, say you don't start saving until you are 40, and when you
finally begin, all you can save is $100 per month. By the time
you turn 65, you'll have a little more than $81,000 in savings,
which translates to a mere $184 per month in income.

"Time is money's best friend," Cunningham says. "Therefore,
people should realize that the retirement decisions they make
today have a large impact on their tomorrow."

Make sacrifices now to enjoy later

Even if you think you can't afford saving for retirement now,
consider making small lifestyle changes and sacrifices to set
some money aside for the future, Plain says.

"People need to look at their own situation instead of trying to
compare their situation to other people," he says. "Just do the
best that you can. Consider finding some extra income source or
cutting expenses. Start with the end goals in mind. Ask yourself,
'What is my lifestyle now, and what do I want it to be in the
future?'"